Hesheng Silicon plans to increase by 2.5 billion, why did the Roche family subscribe to it all?

Combined with the roche family's past history in capital operation, this fixed increase may be the roche family that does not like equity financing, and it is self-help behavior when the company has greater financial pressure.

On May 19, Hesheng Silicon industry threw out a financing plan to issue no more than 132 million shares to Luo Yi and Luo Yedong, raising no more than 2.5 billion yuan to supplement working capital. Luo Yi and Luo Yedong are the children of Luo Liguo, the actual controller of Hesheng Silicon. The Roche family currently holds 70.5% of the shares of the listed company, and the company's shares will be further concentrated after the completion of the increase.

In 2019, Hesheng Silicon's performance was not good, and its stock price went all the way down. Fidelity, the second largest shareholder who has accompanied the Roche family for 13 years, also reduced its stake by half after the stock ban was lifted. At this time, the Roche family increased their holdings and suspected accurate bottom reading.

However, combined with the Roche family's past history in capital operation, this fixed increase may be the Roche family, which does not like equity financing, and self-help behavior when the company has greater financial pressure.

Roche children increase their holdings, self-help or bottom up?

According to the plan, Luo Yi and Luo Ye will each subscribe for 1.25 billion yuan as the target of the offering. Luo Yi is the daughter of Luo Liguo, the actual controller of the company, and serves as the vice chairman of the company. Luo Ye is the son of Luo Liguo and serves as a director and assistant to the chairman of the board of directors of the company. Both currently directly hold 6.11% of the shares of Hesheng Silicon and are listed as the third largest shareholder.

Hesheng Silicon was listed in November 2017, and its stock price has soared once in the following six months, and it has been in a downward trend since then. At present, the stock price is 24 yuan, which is more than half of the price of about 50 yuan at the beginning of the listing. Deteriorating performance is the main reason for the weakness in stock prices.

From 2017 to 2019, Hesheng Silicon's revenue was 6.95 billion, 11.076 billion and 8.939 billion, and its net profit was 1.517 billion, 2.805 billion and 1.106 billion, respectively. It can be seen that in the first year of listing, the performance of Hesheng Silicon Industry was very bright, but it withered in the second year.

The 2019 financial report said that affected by the prosperity of the automobile and other industries, the downstream demand for industrial silicon at home and abroad was light, resulting in the company's production capacity not being fully released, and at the same time, the price of silicon fell seriously compared with the same period last year, resulting in a sharp decline in the price of the company's silicon. Therefore, in 2019, revenue fell by 19.3%, and net profit attributable to the mother fell by 60.56% year-on-year.

The increase in roche's children at this time seems to be a bottom-reading behavior in the company's trough period. However, in view of the current financial situation of Hesheng Silicon, the fixed increase also has a full meaning of "self-help".

According to the first quarterly report, the monetary fund balance of Hesheng Silicon Industry was 403 million, while short-term borrowings reached 3.053 billion, and the non-current liabilities due within one year were 101 million, long-term borrowings were 461 million, and bonds payable were 617 million. In 2019, due to the increase in short-term borrowings and accounts payable, the current ratio and quick ratio of Hesheng Silicon Industry decreased by 25.93% and 30.77% respectively. As borrowing increased but profits decreased, the interest coverage multiple fell by 57.12, from 15.37 to 6.59.

According to the plan, the funds raised in this increase will be used to supplement the working capital after deducting the issuance fee. Hesheng Silicon also admitted in the plan: "The company's asset-liability ratio is slightly higher than the average level of the same industry, with interest-bearing liabilities of 4.441 billion, and the overall debt repayment pressure is relatively large." ”

The second shareholder, Fidelity Industrial, was eager to reduce its holdings and had received a warning letter

Perhaps it is that the stock price of Hesheng Silicon Industry fell too fast, and Fuda Industry, the second shareholder who was eager to reduce its holdings, also had to slow down the pace of reducing its holdings.

Fidelity Industries is an investment company of a Hong Kong company privately owned by Wong Man Tat. Talking about Fuda, we have to talk about the relationship between Huang Wenda and Luo Liguo.

Huang Wenda's cooperation with Luo Liguo began very early. Perhaps because of luo Liguo's hard-working spirit of being born in the "land of straw hats", in 1995, Huang Wenda funded and Luo Liguo to jointly establish the "Hesheng Hat Industry". With the support of Huang Wenda, Luo Liguo began to do OEM production for international brands such as gap and gucci by introducing overseas technology. However, the investigation shows that the Hesheng hat industry has now been cancelled.

After 2000, Luo Liguo started a business again and set his sights on the material industry with high scientific and technological content, and only then did he have today's Hesheng Silicon Industry. When he founded Hesheng Silicon, Luo Liguo also received support from Huang Wenda.

In 2005, Huang Wenda, through Auber Trading, and Tianyi Investment, which luo Liguo held shares, jointly invested 29.8 million US dollars to establish Hesheng Chemical (the predecessor of Hesheng Silicon Industry). Auber Trading and Tianyi Investment hold 30% and 70% of the shares respectively.

Subsequently, Auber Trading has increased the capital of Hesheng Silicon Industry several times. In 2011, Aobo Trading transferred its 32.89% stake in Hesheng Silicon to Fidelity Industrial (Fidelity Is an investment company held by Huang Wenda Holdings) and 1.2% of its shares to Hong Kong Meiqin. Since then, Huang Wenda has not increased its capital, and as of the listing, Huang Wenda has invested a total of about 258 million yuan in Hesheng Silicon.

In November 2017, Hesheng Silicon was listed, and after the listing, Fidelity Industrial held 24.62% of the shares, with a 12-month lock-up period. As soon as the lock-up period passed, Fidelity Industrial began to reduce its holdings and transferred 82.46 million shares (accounting for 12.22% of the total share capital) in half to the children of the actual controller of Hesheng Silicon. In addition, Fidelity Industrial also reduced its holdings by 600,000 shares (accounting for 0.09% of the total share capital) through centralized bidding. The total amount of the two transactions was $3,314 million.

As an investor, Huang Wenda invested in Hesheng Silicon in 2005 and has been around for 13 years since 2018. 13 years is a long process for an investment. However, this investment finally blossomed after the listing of Hesheng Silicon, and at a reduction price of 3.314 billion yuan, this long investment brought Huang Wenda a return of about 25 times.

At the end of October 2019, Fidelity Industrial reduced its shareholding by 0.05% through a collective auction, but because this reduction did not fulfill the obligation of pre-disclosure of more than 5% of the shareholders' reduction, it later received a warning letter from the CSRC.

In November 2019, Fidelity Industrial re-issued a plan to reduce its holdings by no more than 1.6 million shares (0.1706% of the total share capital) through a centralized auction, and the reduction was successfully completed a month later.

Now, Fidelity Industrial holds 12.09% of hesheng Silicon, which is the second largest shareholder. However, since the beginning of the year, Fidelity Industry has not announced a plan to reduce its holdings.

Every miller draws water to his own mill?

The main products of Hesheng Silicon Industry are industrial silicon and silicone. Among them, the industrial silicon business is mainly concentrated in Xinjiang, where it has the advantages of abundant raw materials, energy and other resources and low prices. The main production bases of silicone are located in Zhejiang Province, Sichuan Province and Xinjiang Region.

According to the statistics of the Silicon Industry Branch of the China Nonferrous Metals Industry Association, Hesheng Silicon is currently the largest industrial silicon production enterprise in China.

The Roche family also seems confident about the future of the silicon industry. Therefore, whenever an investor wants to exit, the Roche family is willing to take over.

According to the prospectus, Hesheng Silicon introduced 12 investment institutions in 2011 and received $10.39 million in investment. However, due to the changes in the progress of the IPO of Hesheng Silicon Industry around 2012, the fluctuations in the industry it is located in, and the existence of certain differences in performance and expectations, 10 investment institutions such as Kaisheng Investment decided to withdraw from the investment in Hesheng Silicon Industry.

The Roche family also accepted it calmly and peacefully completed the equity transfer with investors who wanted to exit.

In 2019, the Roche family ceded a stake in Fidelity Industries, the second largest shareholder. In this regard, a relevant person from the Securities Department of Hesheng Silicon Industry said at that time: "The receiver felt that the (transfer) price of Hesheng Silicon Industry was low, and its future profitability and growth performance supported the company's stock price to rise." ”

After the listing, Hesheng Silicon has not carried out any form of equity financing. "If you can pay for it yourself, you can do it yourself, and try not to accept equity financing" seems to be the consistent concept of the Roche family in capital operation.

In 2013, Hesheng Group, controlled by the Roche family, converted the 500 million yuan lent to Hesheng Silicon into equity investment to optimize the company's financial situation. After the listing, Hesheng Silicon invested in expansion in many places (the main project of Shanshan Industrial Park alone invested nearly 8.2 billion yuan), in addition to the IPO to raise 1.37 billion yuan, the funds are its own funds and bank loans.

According to the 2019 annual report, Hesheng Silicon has signed a strategic cooperation framework agreement with the Yunnan Provincial Government to build a "hydropower silicon" circular economy project in Zhaotong, including an annual output of 800,000 tons of silicone monomers (including 800,000 tons of industrial silicon, 500,000 tons of coal-to-organic raw materials) and a downstream deep processing project of siloxanes, of which 400,000 tons of silicon monomers (including 400,000 tons of industrial silicon) and downstream deep processing will be built in the first phase.

Continuous expansion of production, so that Hesheng Silicon industry has been stretched. According to the financial report, Hesheng Silicon industry obtained 4.812 billion yuan of credit from financial institutions, and 3.455 billion yuan was used at the end of the reporting period. In December 2019, Hesheng Silicon issued 100 million yuan of ultra-short-term financing bonds, all of which were used to repay bank loans.

If debt financing is further carried out, the cost of financing will continue to rise. Therefore, Hesheng Silicon industry finally chose to increase financing, but it was the Luo family itself that paid for it. According to the plan, the Roche family currently holds a total of about 70.5% of the shares of Hesheng Silicon. After the completion of the fixed increase, the shareholding ratio will increase to about 74.15%.